Utilities say diesel best short-term solution for power generation

The best short-term supplemental energy option for Southcentral Alaska may be diesel used in power generation, regional utilities led by Enstar Natural Gas Co. and Chugach Electric Association told Anchorage Mayor Dan Sullivan and a municipal energy task force Jan. 9.

Natural gas fields in the region are being depleted and gas will have to be imported from somewhere else beginning in 2014, Pete Stokes, a consultant with Petrotechnical Resources of Alaska, a firm advising regional utilities, told the task force.

Cook Inlet explorers are busy but they have yet to announce any significant discoveries, Stokes said.

The regional utilities as well as DonlinGold, a mining company that needs gas for a planned large gold mine, are studying imports of liquefied natural gas (LNG) or compressed natual gas (CNG).

At this point LNG appears to be more practical because the technology is well-proven, Robert Gibb, a consultant working for the utilities’ supply group, told the mayor and the task force. However, neither LNG or CNG could be brought in by 2014 to fill the gap, so diesel, used in the smallest possible increments, is the only workable short-term option, he said.

How this would really work is still under discussion and the utility group met Jan. 10 to work out details, but Enstar spokesman John Sims said the outcome of the meeting is still confidential.

Enstar President Colleen Starring told Sullivan and the energy task force that there is no way her utility can use diesel, so the short-term diesel option is really one that the electric utilities will have to rely on.

Gas that the utilities would use could then be diverted to ensure Enstar has enough.

Chugach Electric Association, however, has no diesel generation capability in its power plants, which are all gas-fired. Anchorage-owned Municipal Light & Power has the ability to use diesel in its power plants.

Meanwhile, a new power plant being built by Matanuska Electric Association at Eklutna, north of Anchorage, has engines that can run on diesel as well as gas. The electric utilities can also buy more power from Golden Valley Electric Association in Fairbanks, which has oil-fired generation. That power could be sent to Southcentral Alaska on an electric intertie that connects the two regions.

Gov. Sean Parnell doesn’t like the idea of importing LNG but there may be no alternative, Mayor Sullivan said.

Sullivan said the Jan. 9 presentation confirmed his belief.

“There will be insufficient proven reserves of natural gas within two years and action must be taken immediately to get gas under contract,” Sullivan said in a statement. “It appears that the importation of LNG or possibly CNG are the only guaranteed sources that can fill the unmet demand.”

Diesel will be expensive, however. Tony Izzo, an energy consultant and former Enstar executive who is on the mayor’s task force, said that diesel, at $3.80 per gallon, would be the equivalent of about $30 per thousand cubic feet of natural gas, about four times what newly-produced gas is being sold for now in the Cook Inlet region.

“Is that worth it to keep the lights on? Sure it is,” Izzo said.

LNG or CNG imports, most likely from British Columbia, are seen as a mid-term option, for 2016 or later, Gibb told Sullivan and the task force. By then Cook Inlet explorers may also have announced discoveries and put new gas into production.